Minnesota's business creation jumps 18%

Minnesotans started more new businesses in 2012 than all but one year in the state's history.

Filings in 2012 of corporations, limited liability companies, partnerships, limited liability partnerships and nonprofit corporations were up 18 percent on the year, the secretary of state's office reported Tuesday.

But whether the 60,827 new business filings is a good sign for the state economy is up for debate. While business formations suggest optimism about the ventures' prospects, the only year with more filings was 2009, near the bottom of the recession.

Kelly Guncheon, president of Small Business Minnesota, said people are starting new businesses either because they can't find a job or because their confidence in the economy is growing -- or both.

"It may be a result of the economy, it may be a result of people being out of work for an extended period of time," Guncheon said. "We have an incredibly entrepreneurial state."

Roughly half of the new businesses filed for in 2012 were limited liability companies. Most of those are likely one person, Guncheon said.

People who've been laid off from a corporate job, or who don't like their prospects in the corporate world, are more likely to create a new business.

That dynamic was clearly at work in 2009, said Dane Smith, president of Growth and Justice, a policy research group in St. Paul. Unemployment was rising, finding a new job was difficult and more than 63,000 new businesses were filed.

"The '09 figures might actually have been driven by layoffs," Smith said. "Lots of midlevel folks in all kinds of businesses who lose jobs with the big corporations or midsize companies, will hang out a shingle of some sort when they are laid off."

About 168,000 people were unemployed in Minnesota in November.

Business filings have risen steadily in Minnesota in the past two decades, doubling from 1990 to 2005 and increasing almost another 10 percent in the past seven years.